Defence stocks gain on war rumblings

Mumbai: Defence sector stocks surged as geo-political tensions escalated on both sides of the India-Pakistan border, with top defence suppliers Larsen & Toubro, Hindustan Aeronautics, Ashok Leyland, Mahindra & Mahindra, Bharat Forge, Cochin Shipyard, Bharat Electronics, among others, attracting investors attention.

While market benchmarks Sensex and Nifty traded lower as news broke of Day Two action, in which both sides lost one fighter aircraft each. Sensex and Nifty closed the day in the red. However, stocks of companies supplying defence equipment to Indian defence forces attracted buying interest from early morning trade on Wednesday.

Gainers on the BSE included Larsen & Toubro (1.49 per cent), Ashok Leyland (1.92 per cent), Hindustan Aeronautics (0.77 per cent), Bharat Electronics (0.69 per cent), Bharat Forge (0.89 per cent), Mahindra & Mahindra (0.92 per cent), Mishra Dhatu Nigam (3.23 per cent), Astra Microwave (2.26 per cent), Cochin Shipyard (0.72 per cent), Garden Reach Shipbuilders (0.35 per cent) and Reliance Naval & Engineering (0.64 per cent).

Since FY15, the Ministry of Defence has signed 150 contracts worth Rs 1.3 lakh crore with Indian vendors for procurement of defence equipment, said a report on the defence sector by Yellapu Santosh, analyst, IndiaNivesh Institutional Equities.

“Acceptance of Necessity (AoN; after this, tendering process starts) has been accorded to 164 proposals worth Rs 2.8 lakh crore under the Indian-IDDM (Indigenously Designed, Developed, and Manufactured) and other Make in India categories. Such a strong bid pipeline gives improved visibility on the awarding for the next few years,” Santosh said.

Highlighting the success of Make in India, the Defence Minister during the recently concluded Aero Expo 2019 said that 424 companies have received licences for defence production in the country.

Among the defence manufacturing private sector players, L&T is one of the leading private companies for supply of defence equipment and systems, ranging from land-based weapon launch systems, air defence and artillery systems & upgrades to naval weapon launch systems, bridging systems, communication, avionics and missile systems.

L&T also offers specialised turnkey defence construction solutions like underground structures, military bases, storage depots, smart infrastructure and modernisation of existing facilities.

A subsidiary of Ashok Leyland, Ashok Leyland Defence Systems is involved in manufacturing military trucks such as the widely used Stallion troop carriers. Ashok Leyland has been involved in the design and manufacture of defence vehicles.